EMEA Base Oil Price Report

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Base oil prices in Europe, the Middle East and Africa continue to respond to rising crude oil levels, with increases applied to all but API Group III grades and most notably to Group I, which is also reportedly short in some regions.

At least three main base oils producers are undergoing or will soon undergo maintenance, which will most likely affect availability. With possible sanctions against Russian exports, there are fears that an already-tight Group I market (in regards to heavier-viscosity cuts) could become exceptionally short.

Sellers have used every piece of negative news to push prices higher, with offers for Group I grades moving $20/t-$50/t forward, and with buyers now showing concerns regarding supplies for May loading and delivery.

Dated deliveries of Brent crude has breached the $45 per barrel threshold this week and now trades at $45.75 per barrel in front month June settlement. West Texas Intermediate crude now stands at $44 per barrel. These stronger prices are despite investors taking profits after the near 20-percent rise in crude prices over the last three weeks, showing that there may be considerable strength behind these futures. ICE L.S. Gas Oil trades at $397 per metric ton – the highest this year.

Mainstream Group I light solvent neutrals within Europe have moved higher, to $480/t-$495/t FOB, whilst the heavy neutrals are $499/t-$525/t in offers. Bright stock grades are firmly in demand – not just for West Africa receivers, but also for North African and East Mediterranean buyers. Bright stock prices are $920/t-$945/t, with some sellers offering up to $20/t higher for large parcels.

The levels above are in respect of large parcels of Group I grades being offered and made available on basis of FOB sales ex mainland European producers.

Local prices are reported to be under review, with a number of sellers offering new contracted and spot monthly levels for May lifting or delivery. Prices are heard to have firmed by 20/t-30/t for ex tank sales.

Many buyers are voicing concerns regarding future avails and are looking to build inventories to insure against any possibilities. Increasing demand is lending to higher prices, which in turn is adding to demand. With petroleum product prices climbing back to levels last seen during the fourth quarter of last year, the market is braced for base oils to move up the same road. Were this to be the case, then further price hikes of d 20/t-30/t could be possible in weeks to come.

This week, the price differential between local ex tank sales and exports levels increased slightly to 75/t-90/t, taking account of the surge in local purchases.

Group II prices appear to be rising in line with Group I. Similarly to local or domestic sales of Group I products, Group II grades are also under revision for price increases effective May 1. Source increases have played an important part of quantifying the rises applied. But there also appears to be increasing demand, perhaps brought about by the possible shortening of Group I material. Prices for May are expected to rise 20/t-35/t depending on grade, viscosity and approvals.

Prices in respect of the range of light vis grades 70 neutral through 220N are now assessed at $535/t-$585/t, with heavier vis material 500N and 600N at $665/t-$720/t, in dollar terms, on ex tank basis. An additional 50/t-120/t premium may be applied to these prices where Group II products are redelivered to satellite storage facilities or are sold on a delivered basis.

European Group III sales are reported to be moving ahead with an increase in offtake from large buyers and also smaller blenders purchasing material in trucks. There would appear to be a considerable difference in prices between Group III grades being sold on a CIF basis into major buyers storage facilities and material which is sold on an ex tank basis or FCA basis, or through a distribution network. Some estimates have the differential at more than 100/t, and although prices in respect of large bulk sales are maintained on a strictly private and confidential basis, some sellers have commented that to remain competitive in an oversupplied market, prices have necessarily been very keen in the case of large organizational buying.

At the lower end of the spectrum, levels in respect of the two main grades have at last lifted this week despite an oversupplied market. Levels notified for May to some smaller buyers in respect of the two main grades, 4 centiStoke and 6 cSt, have shifted 10/t-15/t higher to 845/t-870/t basis ex-tank Antwerp-Rotterdam-Amsterdam sales.

Baltic and Black Sea

Demand for Russian-exported base oils out of the Baltic has increased, perhaps as a result of perceived lack of Group I base oils being made available ex northwestern European refiners. Buyers in the United Kingdom and Antwerp-Rotterdam-Amsterdam have issued a number of enquiries for large parcels of solvent neutral 150 and SN500, and in some cases, SN900 is added to these requirements, although most of the avails of SN900 are being targeted at deep-sea markets such as West

However, with continuing problems regarding issuance of letters of credit from Nigeria, many cargoes have been put on hold for this destination. One large cargo of around 10,000 tons has been loaded ex Riga, Latvia, but others remain on the backburner awaiting a solution to the ongoing liquidity problem regarding foreign currency.

FOB prices have firmed $15/t-$25/t this week for May-loading material, in light of both recent crude moves and also increasing demand from European blenders. Levels for SN150 and SN500 are $465/t-$480/t, and $490/t-$515/t, respectively. The SN900 grade is being offered at $675/t-$710/t either FOB or FCA, depending on size of parcel and method of shipment.

Black Sea reports have shown a large slug of Russian base oils being exported from Port Kavkaz, bound for Antwerp-Rotterdam-Amsterdam – showing that with the right shipping in place, this arbitrage and voyage can be undertaken with a parcel of 9,00 tons of mixed Group I grades. Prices for these grades will be ultra competitive on a delivered basis: possibly between $495/t-$4510/t in respect of SN150 and SN500, with SN900 around $705/t CIF.

Other planned cargoes into Turkey appear to have been sourced from the Mediterranean and not from Black Sea ports, with a large parcel of 8,000 tons loading out of Greece for Derince. Prices will be substantially lower than the usual imports for 3,000- to 4,000-ton cargoes due to lower freight costs. Levels are expected to be $545/t-$555/t in respect of SN600, coupled with SN100/SN150 between $510/t and $525/t.

Middle East Gulf

Middle East Gulf exports of Group I are being fixed into the west coast of India, with one new enquiry for 4,000-5,000 tons of Iranian SN500 from receivers in China. Iranian export prices have continued to firm, with levels approaching $490/t for standard export grades, with a premium of around $10/t added for premium-quality SN500 now being produced and exported by one of the Iranian refiners. Other Iranian grades, SN150 and SN650, are still around, but are shaded by the quantities of SN500 which are being taken out of Bander Khomeini and Bandar Bushehr.

On the Group I front, a large cargo of almost 15,000 tons has loaded ex Mediterranean and Red Sea ports for receivers in two ports in the United Arab Emirates. Prices for such a large slug will reflect economies of scale from freight savings, and landed prices may be $535/t-$575/t in respect of the solvent neutrals, with bright stock around $970/t delivered CIF. Whilst these prices are far in excess of the Iranian export levels of around $515/t landed into U.A.E., the higher specifications are important, along with the inclusion of the bright stock grade.

Another large quantity is being worked into Sohar, Oman, and onwards to the west coast of India. This parcel of around 16,000 tons is programmed for early May loading out of Red Sea port Yanbu, Saudi Arabia.

There were no reported Group II parcels arriving into Middle East Gulf receivers this week. Suspicion is that with prices firming, yet uncertainty still remaining over crude and feedstock levels, buyers who are not desperate to replace inventory will stay away from the market until some direction is established. Offered prices have moved $10/t-$25/t forwards depending on grade. The lower-vis 100N/150N grades are now $560/t-$575/t, with the heavier 500N and 600N between $675/t-$690/t CIF/CFR.

Africa

Only one North African cargo was reported this week: a 5,000-ton parcel to buyers in Egypt. Prices werent revealed, although it is assumed that perhaps with three Group I grades making up the parcel, prices would follow FOB Mediterranean levels plus freight. Morocco has not been nominated as a discharge port, but one traded parcel of Russian export base oils ex Baltic is looking to North African receivers.

West Africa trade is progressing, albeit extremely slowly, with traders waiting for payments for a number of cargoes which have been delivered into Nigeria. Some finance is available to traders willing to take the risk of placing material into this market with the assurance of timely payment. This takes the form of extended facilities to approved traders who have some form of reassurance that funds will eventually be received from Nigerian buyers.

The two nominated Group I cargoes moving from the Baltic and northwestern Europe have been fixed and will arrive into Apapa, Nigeria, during the second half of May. Prices are assessed on the basis of FOB levels plus freight from the Baltic and northwestern Europe at $535/t-$595/t for SN150 and SN500, with SN900 ex Baltic landing around$795/t, CIF/CFR. Bright stock, if loaded from northwestern Europe, is deemed to land at $1035 /t-$1055.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.

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